Comparison•2025 Tax Year•Last verified: January 2026
California vs Texas: Side Hustle Tax Comparison 2025
Compare California and Texas taxes for freelancers and gig workers. See how much you'll save on your side hustle income in each state with our free calculator.
California and Texas represent two fundamentally different approaches to taxation—and for side hustlers, the difference can mean thousands of dollars per year. With over 102,000 people moving from California to Texas annually (the largest interstate migration route in the US), understanding the tax implications of this move is crucial for anyone earning freelance or gig income.
California has the highest top marginal income tax rate in the nation at 13.3%, while Texas has no state income tax at all. But the full picture is more nuanced than just comparing rates. This guide breaks down exactly what you'll owe in each state on your side hustle income.
**Why This Comparison Matters:**
According to U-Haul and US Census data, California-to-Texas is the #1 interstate migration route in America, with approximately 102,000 people making this move annually. The primary drivers cited are:
- **Lower taxes**: Texas has no state income tax
- **Lower cost of living**: Housing costs 40-60% less in most Texas cities
- **Business-friendly environment**: Texas consistently ranks as a top state for entrepreneurs
For side hustlers specifically, this move can result in keeping an additional 9-13% of your freelance income that would otherwise go to California state taxes.
Side-by-Side Tax Comparison
| Metric | California | Texas |
|---|---|---|
| State Income Tax Rate | 1% - 13.3% (progressive) | 0% (no income tax) |
| Common Rate for Side Hustlers | 6% - 9.3% | 0% |
| State Tax Filing Required | Yes (Form 540) | No |
| Federal SE Tax | 15.3% | 15.3% |
| Estimated Tax on $15K Side Hustle* | ~$6,819 | ~$5,424 |
| Effective Rate on Side Hustle* | ~45.5% | ~36.2% |
| Annual Savings (TX vs CA)* | — | ~$1,395 |
| Property Tax (Avg Rate) | 0.71% | 1.63% |
| Sales Tax (State + Avg Local) | 8.82% | 8.20% |
*Assumes single filer with $60,000 W-2 income + $15,000 net side hustle income. Actual taxes vary based on deductions, filing status, and total income.
California Analysis
**California Tax Analysis for Side Hustlers**
California uses a progressive income tax system with nine brackets ranging from 1% to 13.3%. For most side hustlers earning $10,000-$50,000 in self-employment income on top of a W-2 job, you'll likely fall into the 6% to 9.3% bracket range.
**Key California Tax Facts (2025):**
- **Tax Type**: Progressive (9 brackets)
- **Rate Range**: 1% to 13.3%
- **Common Side Hustler Rate**: 6% to 9.3%
- **Additional Tax**: 1% Mental Health Services Tax on income over $1 million
- **Filing Requirement**: Must file if gross income exceeds $20,913 (single)
**Example**: If you earn $60,000 from your W-2 job and $15,000 from side hustle income (net of expenses) in California:
- Federal SE Tax: ~$2,124
- Federal Income Tax on side income: ~$3,300
- California State Tax: ~$1,395
- **Total Tax on Side Hustle: ~$6,819** (45.5% effective rate)
California does offer some benefits: robust consumer protections, strong enforcement of labor laws for gig workers (AB5), and no local income taxes layered on top.
Texas Analysis
**Texas Tax Analysis for Side Hustlers**
Texas is one of nine states with no state income tax, making it one of the most tax-friendly states for self-employed individuals and freelancers.
**Key Texas Tax Facts (2025):**
- **State Income Tax**: 0%
- **Tax Type**: None
- **Filing Requirement**: No state income tax return required
- **Franchise Tax**: Only applies to businesses with revenue over $2.47 million
**Example**: Same scenario—$60,000 W-2 job and $15,000 from side hustle income (net of expenses) in Texas:
- Federal SE Tax: ~$2,124
- Federal Income Tax on side income: ~$3,300
- Texas State Tax: $0
- **Total Tax on Side Hustle: ~$5,424** (36.2% effective rate)
**Savings vs California: $1,395/year** on $15,000 of side hustle income.
Texas does have trade-offs: higher property taxes (averaging 1.6% vs California's 0.7%), higher sales taxes in some areas (up to 8.25%), and no state-level worker protections for gig workers.
Calculate Your Side Hustle Taxes
Use our calculator to see exactly what you'd owe in each state. Try entering your numbers, then switch between California and Texas to compare.
Which State Is Right for Your Side Hustle?
**California May Be Better If You:**
- Value strong gig worker protections (AB5, Prop 22)
- Have significant property assets (lower property tax rates)
- Work in industries with California-specific opportunities (tech, entertainment)
- Prioritize access to California's consumer protection laws
- Already have established clients/business in California
- Plan to earn over $1M annually (tax planning opportunities)
**Texas May Be Better If You:**
- Prioritize keeping more of your side hustle income
- Are relocating anyway and taxes are a factor
- Run a purely online business with no location dependency
- Have minimal property (Texas property taxes are higher)
- Value lower overall cost of living
- Want simpler tax filing (no state return)
**Important Considerations:**
1. **Don't move just for taxes**: Moving is expensive and disruptive. The tax savings need to outweigh relocation costs and lifestyle changes.
2. **Residency rules matter**: California aggressively audits former residents. You must genuinely relocate—maintaining a California address, returning frequently, or keeping professional licenses can trigger California tax liability.
3. **Consider total tax burden**: While Texas has no income tax, property taxes are 2.3x higher on average. If you own a $500,000 home, that's roughly $4,600 more per year in Texas.
4. **Remote work complications**: If you work for a California company remotely from Texas, you may still owe California tax on that income under certain circumstances.
5. **Business registration**: Texas has a franchise tax for businesses with over $2.47 million in revenue. Most side hustlers won't hit this threshold.
Frequently Asked Questions
How much will I save moving from California to Texas for my side hustle?
The savings depend on your income level and tax bracket. For a typical side hustler earning $15,000-$30,000 annually in self-employment income, you could save $1,400-$2,800 per year in state income taxes by living in Texas instead of California. However, factor in Texas's higher property taxes and moving costs before making this decision.
Do I still pay self-employment tax in Texas?
Yes. Self-employment tax (15.3%) is a federal tax, not a state tax. You'll pay the same SE tax whether you live in California, Texas, or any other state. The difference is Texas has no additional state income tax on top of your federal taxes.
Can California tax me after I move to Texas?
California can tax income earned while you were a California resident, and they actively audit former residents. To avoid ongoing California tax liability, you must establish genuine Texas residency: update your driver's license, register to vote, change professional licenses, and spend the majority of your time in Texas. California's Franchise Tax Board is known for aggressive pursuit of former residents who maintain California ties.
Related Comparisons
Sources
- • California Franchise Tax Board - 2025 Tax Rates
- • Texas Comptroller of Public Accounts
- • IRS Publication 334 - Tax Guide for Small Business
- • US Census Bureau - State-to-State Migration Flows
- • Tax Foundation - State Tax Data 2025